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Why do we find ourselves in sudden, unforeseen financial troubles?
There are scores of reasons people find themselves stuck between the proverbial rock and a hard place.
Today, we’re going to look at some of the top reasons people end up in credit card debt and why it’s so critical to have an emergency fund (at least $1000).
1. The Unexpected Medical Emergency
We all try to take care of ourselves (well….most of us), but you can’t always anticipate when things will go wrong.
One minute you’re walking down the street, with the sun shining bright, a breeze in your hair and a song on your lips — and the next minute you’re having a burst appendix removed. One minute your son is running down a fly ball, and the next he’s getting a cast on a broken arm.
Medical emergencies come in all shapes and sizes, so make sure you’re ready to cover the out-of-pocket expenses.
2. Unexpected Home Repairs
Imagine: you’re sitting in the living room one evening, quietly reading. Out of nowhere, a tree branch comes crashing through your roof. Or the washing machine pipes burst. Or the refrigerator goes haywire. What do you do?
If you have an emergency fund, you’ll be ready.
3. Unexpected Auto Repairs
As with home repairs, you never know when a tire or two may blow out, when a battery may die, or when the transmission may just fall out of your vehicle altogether.
Stay prepared and you’ll be ready for anything.
4. Sudden Job Loss
Many companies are still going through layoffs.
As I’ve said before, for working class people, job security is simply a thing of the past. You never know when a company, in the omnipresent effort to “cut costs,” will decide that the costs to cut are your wages.
That emergency fund will go a long way toward weathering the storm of unemployment.
5. Family/Friend Emergency
Some people don’t really care about this one, but if my best friend or a close cousin falls prey to financial woes, I’m going to be there to support them and help them out in any way that I can. That includes financially.
If it’s within my power and my bank account to help, I wouldn’t hesitate. Of course, I’m not going to throw money at somebody who was just irresponsible with their money, but if it’s an unavoidable situation, I’ll be there.
Remember: what goes around comes around, and you may want somebody to catch you someday.
6. The Unexpected Pregnancy
Sometimes, things that are supposed to the most joyous of occasions in life can quickly fill us with the most dread.
Take an unexpected pregnancy, for example. After the initial shock, the phone calls to tell everyone, and the novelty pass you’re quickly confronted with the sheer magnitude of the situation. You’re about to bring a new life into the world, and as any parent already knows, that’s not cheap.
An emergency fund may be able to help you pay for a lot of the hospital costs and baby essentials that you’ll need when your new little one comes home for the first time.
Conclusion
So make sure that you’re protected by building your emergency fund! Fast! You might just come home to find that tree branch has crashed through your roof, into your garage, and right through the window of your car.
Unlikely? Of course, but you never know. But when you have your emergency fund (and insurance), you’ll be ready! See you later!
Need help building your emergency fund? Create your budget and track your spending in The Frugality Game!
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I like how you included a list. Everyone says to get an emergency fund, but it’s much more effective as advice when there’s a good list of reasons why! My goal is to have a good chunk just for emergencies and then 2 years of living expenses. It will be nice to feel that protected and comfortable.
Good Luck. I will do good just to be able to have the emergency fund.